Shortsighted approaches lead to overspending.
Most air freight – including for printed circuit boards – is hauled in the cargo holds of passenger aircraft. While the number of available flights is slowly increasing as Covid restrictions lessen, the price is still high, and getting PCBs delivered on time and at a reasonable cost remains a significant challenge for buyers.
That’s why they should negotiate with suppliers for a “delivered” price.
PCB buyers often overlook fluctuating freight costs when considering total cost of ownership (TCO) of the offshore products they purchase.
I’ve dealt with many buyers from OEMs and EMS companies who insist on buying PCBs without any regard for or knowledge of the actual freight costs. The mentality is that freight is handled by another department and is not the buyer’s concern.
But this shortsighted approach means companies are more likely to overspend on their PCB purchases.
It’s always better to negotiate a delivered price, especially when it comes to high-mix, low-to-medium volume purchasing. When you have multiple part numbers, each with a different delivery date, it just makes sense to pay the delivered price and move on to your next project.
Even for buyers who need low-mix and a higher volume of product, buying at an ex-works (EXW) or FOB origin price may not be the best practice.
Here are several scenarios where failure to negotiate a delivered price will cost you:
Keep in mind that tariffs on PCBs manufactured in China are based on the factory price at time of export and not on the cost of any freight or overhead. PCB buyers should periodically ask for both a factory price and a delivered price to keep tabs on current freight costs and ensure tariffs are being applied correctly.
A variation of the delivered price model is to have inventory consigned, especially when it comes to larger or consistently running part numbers.
It is understandable many OEMs like to have product on the shelf, ready to be assembled on a moment’s notice. But that convenience comes at a cost, as it is expensive to have already paid-for product sitting on the production floor, waiting to be shipped out.
Buyers should have a negotiated program in place permitting their PCB supplier to maintain agreed-upon inventory levels while only invoicing the purchasing company at time of use. One invoice covers the cost of the product, the freight to get it to the dock, any applicable tariffs, and the cost of having it sit on the supplier’s shelf.
The more certainty buyers can build into their supply chains, the better. Working with a good board manufacturer and practicing smart PCB purchasing will help control costs year-round and increase corporate cash flow. •